Coinbase Stock Surges 57% on S&P 500 Inclusion, Bitcoin Rally

Coinbase's stock price experienced a significant surge in the pre-market trading on Tuesday, reaching a high of $223, marking an increase of over 57% from its lowest point this year. This rally is primarily attributed to the company's impending inclusion in the prestigious S&P 500 Index, a move that is expected to drive further gains. Historically, companies added to the S&P 500 often see a boost in their stock prices due to the index's prestige and the mandatory purchases by ETF providers. However, it is also common for these stocks to experience a retreat as the initial momentum fades.

In addition to the S&P 500 inclusion, Coinbase's stock price is also benefiting from the recent surge in the Bitcoin and broader crypto market. Bitcoin has surpassed the $100,000 milestone, while Ethereum has jumped to $2,500. Although these cryptocurrencies have since pulled back, there is a likelihood that they will rebound after the profit-taking period ends. Furthermore, the truce between the United States and China, along with the prospect of more trade deals, could provide additional support for these digital assets.

Despite the positive market sentiment, Coinbase's recent financial results missed analysts' estimates. The company reported revenue of $2 billion for the quarter, a 10% drop from the previous quarter. This decline was largely due to the crypto market plunge that occurred in the first quarter. However, Coinbase's revenue still showed modest growth compared to the previous year, driven by the diversity of its solutions. The company's transaction revenue increased from $1.02 billion to $1.26 billion, while its subscription and services revenue jumped from $510 million to $696 million. This diversification has helped Coinbase generate revenue from stablecoins deposited on its platform, as well as from blockchain rewards, interest, and finance fees.

Coinbase's stock price is closely tied to the price of Bitcoin, often rising and falling in tandem. As analysts predict that Bitcoin will reach a new all-time high soon, Coinbase's stock price is likely to continue its upward trajectory. The daily chart shows that Coinbase's stock price bottomed at $145.78 in April, coinciding with its lowest point in September last year. The stock has since formed a bullish flag pattern, a popular bullish continuation sign, and has moved above the 50-day and 100-day moving averages. This technical analysis suggests that the stock could continue to soar, with bulls targeting the double-bottom’s neckline at $350, up by 70% above the current level. However, this bullish outlook could become invalid if the stock crashes below the support at $150.